Goods & Service Tax

Goods and Service tax is nothing but the tax collected by a consumer for a goods or a service. This tax includes all the indirect taxes on Goods and services and hence consumers needs to pay only single tax as Good and service tax.

This tax is said to be enacted from the June, 2016 which was introduced by Arun Jaitley.

Officially this Goods and Service Tax is known as The Constitution-One Hundred and Twenty-Second Amendment 122nd Bill, 2014.

Challenges for Goods and Service tax to be available in reality

The major challenge for Goods and Service tax to be passed in a constitutional legal way is that it should be passed in both houses of parliament. This GST bill was passed in Loksabha in May, 2015.

But there were so many objections raised by opposition parties on the Goods and Service – GST so that it was on hold from the Rajya sabha.

The opposition party Congress wanted provision capping for Goods and Service tax at a rate of 18 percent to be added to the GST Bill itself. For manufacturing states, The congress also wants to divide the proposed 1 percent additional-Over and above the Goods & Service – GST bill.

Congress also wanted to change the Goods and Service tax council which decides the various parameters like rate of tax, Period of collection of additional tax, Special allocation to certain states, Principles of Supply etc. in a way that council has to be two-third from the comprised states and one-third from the center. Congress wanted to reduce the center’s share to one-fourth.

However, The demands raised by Congress was rejected by the Rajyasabha. And Amendment is done for Goods and Service tax-GST bill in a constitutional legal way and cabinet has given the green signal for clearing this bill in July 2015.

Important points to be noted on Goods and Service tax – GST Bill

Finance Minister of India, Arun jaitley has introduced the Goods and Service tax GST bill in the Loksabha on 19th December, 2014.

Goods and Service – GST bill will includes each and every indirect taxes such as Central Excise Duty, Service Tax, Countervailing Duty, State’s Value added tax- VAT, Octroi, Entry tax, Luxury tax etc. It will include all these taxes into single tax under GST.

Goods and Service – GST bill is legalized and inserts a new Articles in the constitution for the taxation of Goods and services with having the power of the Center and the states.

Parliament has power to decide on the Goods and Service tax-GST Bill if the States incurred the loss by implementation of GST bill, Parliament can decide compensating the states up to 5 year period.

Under Goods and Service tax- GST Bill, The consumption of alcohol liquor is excluded from it. This should be under the power of GST Council to decide when the GST has to be collected on Fuel categories such as Crude oil and petrol.

GST Council (GST Council consists of Union Finance Minister as chairman, Union minister of state as in charge of revenue or Finance And Minister in charge of Finance or taxation etc nominated by each state government ) will be deciding the taxes collected by center, State and local bodies should go into Goods and service tax or not.

In short, Which Goods or service is accordance with the GST bill and appropriate to it and the basis of the rate it will go under GST.

Advantages of Goods and Service Tax-GST bill

There are some advantages of introducing the Goods and Service tax-GST Bill in India :

Reduction in prices of Goods and Services : Traders or Manufacturers do not have to include the cost of production as part of their taxes, This will be the major chunk where people will save money and reduction of prices. But on the other side, If the Government introduce the Goods and Service tax on higher rate then this parameter might affect.

Uniqueness of Goods and Service-GST Bill across : GST bill will be always preferred as a single tax entity in a unified form rather than dual GST format internationally. Hence, Unified GST will be the best method to over come the indirect hidden and other taxes.

Less complicated : GST Bill is less complicated as it is in Unified single form and no headache of maintaining the big data records and reporting to various departments for this. Hence, Compliance cost for GST will be reduced.

Win-Win situation for Government and consumer : Government may wish to introduce the Goods and Service tax-GST bill at a revenue neutral rate which may lead to increase in the short run and this is still a vague concept to be decided where earlier people or consumer has to pay more tax rather than avoiding it.

Reduction in Tax evasion : All the traders/Consumers has to take bills for the purchases on goods or services. After GST bill, The manufacturer or distributor will have to prefer the Invoice bill and this can not be avoided. In this way, The reduction in tax avoidance will happen in optimistic way.

No Location biasing : GST will remove the location bias tax collection. For example, If I want to set up a company in Maharashtra considering I am from Gujarat then no extra or more taxes will be collected. It will be levied on the unified tax structure only. Hence the Start ups and Businesses does not have to worry about the tax differences. This way GST removed the location based biasing.

Providing money to under-developed States : GST bill will be providing money to the under developed states for basic facilities such as improving the infrastructure, 24 hours Electricity, Easiness for Road transportation etc. GST will be taking care of the tax collections in all the states that should rise because GST bill is a consumption based tax and in this way GST is one of the best method to improve the Indian taxation system and enhance the economy of the India.

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